Won't lose any money by scrapping chopper deal: India

January 02, 2014 21:43 IST

A day after terminating the tainted VVIP helicopter deal with AugustaWestland, the defence ministry has set in motion the process of encashing the bank guarantee of nearly Rs 1,700 crore furnished by the Anglo-Italian firm.

Stating this, defence ministry sources asserted that India will not lose any money in the Rs 3,600 crore deal, in which payment of 30 per cent has already been made.

The deal was for supply of 12 AW-101 helicopters, of which three had already been delivered before the contract was frozen after allegations of kickbacks surfaced in February last year.

"The MoD is not going to lose any money. India will not lose any money," a ministry source said amid concerns over the fate of the money already paid.

AugustaWestland is said to have deposited over 200 million euros (about Rs 1,700 crore) in international and Indian banks as bank guarantee for the deal.

Official sources said the ministry would soon take a call on the fate of three choppers. This is the first time a defence deal had been scrapped midway during the acquisition under such circumstances, they said.

India terminated with immediate effect the agreement, which was signed on February 8, 2010, on grounds of breach of "the Pre-contract Integrity Pact and the agreement" by the firm, the ministry had said on Wednesday.

Controversy over the 2010 deal for the supply of 12 helicopters for Indian VVIPs erupted in February last year with the arrest of two top officials of the firm in Italy, triggering a political storm.

Former Indian Air Force chief S P Tyagi is one of the accused in the case which is being probed by the Central Bureau of Investigation.

AgustaWestland has invoked arbitration proceedings and India has appointed Justice (retired) Jeevan Reddy on its behalf for arbitration as it does not want to go unrepresented.

Meanwhile, the United Kingdom defended AgustaWestland, saying time should have been given to establish the veracity of the bribery allegations before any action is taken.

"In my view it would have been preferable to give time to establish the veracity of the allegations which have been made before taking any action.

“AgustaWestland has over many years demonstrated its resilience, based on the outstanding quality of the helicopters which it makes," said UK Education Minister David Laws. Laws said he expects the company to go on selling its products all over the world and to show that this "setback can be overcome".

The Indian government had announced the termination of the order "with immediate effect" on Wednesday over allegations the company paid bribes to win the deal.

The company, however, said it has not received "any official notification of such a cancellation from the Indian ministry of defence".

"The company is therefore unable to comment beyond reiterating the denial of allegations of wrongdoing," said a spokesperson for AugustaWestland.

The company is expected to pursue a legal battle in relation to the agreement for the supply of 12 three-engine luxury AW-101 helicopters to the defence ministry signed in February 2010.

India had suspended payments in February 2012 after allegations of bribery involving parent Italian firm Finmeccanica had emerged.

The termination of the contract is likely to cast a shadow on India-UK ties.

British Prime Minister David Cameron, during his visit to India last February, had publicly backed the helicopter firm amid bribery allegations.

UK Trade and Investment, the British government’s exports department, had viewed the deal as a major boost for its plans to develop the country into a centre for high-value manufacturing.